TZERO White Paper

tZERO understands that regulation in the crypto-world is inevitable and we are working to develop a scalable and stable securities token trading platform that, when operational, will be fully compliant with applicable legal and regulatory requirements.
The launch of tZERO’s own token is intended to capitalize tZERO to, among other things, develop a
crypto-solution for security token liquidity that complies with applicable legal and regulatory requirements and to build the necessary infrastructure to support global adoption of this platform. We believe that the tZERO trading platform, once operational, has the potential to democratize, expand and strengthen capital markets.

distributed ledger platform for capital markets

WHITEPAPER January 27th, 2018

This White Paper forms part of, and should be read together, with the O ering Memorandum, dated December 18, 2017 (as amended andsupplemented from time to time, the “Memorandum”), including, withoutlimitation, the important information included in the Memorandum under the headings “Risk Factors” and “Notice to Purchasers.” WHITEPAPER

Backgroundwhich first achieved broad market attention in 2016 and 2017, introduced an entirely new model forcapital formation. ICOs allow companies of any size to raise money directly from individual marketparticipants through the global sale and distribution of digital tokens or coins (tokens). The majority ofthe tokens issued in ICOs are issued using Ethereum’s “ERC-20” protocol, which allows for a stream-lined token creation process. Token purchasers are able to directly purchase tokens utilizing Ether orother cryptocurrencies as well as fiat currency.

ICOs provide purchasers with a means to invest in companies while bypassing traditional financingmethods and counterparties. Fiscal year 2017 yielded the creation of 235 ICOs and approximately $3.7 [1] - [2]ings and approximately $36 billion.

The increased access to capital for entrepreneurs that is provided by ICOs is exciting and praiseworthy.However, ICOs are still nascent and raise many issues that need to be resolved before blockchain-trad-able security tokens may expand to reach their market potential. Recent increases in demand for li-quidity in security tokens issued pursuant to ICOs have highlighted the lack of a credible, scalablesecurity token trading platform that we believe is necessary to support widespread global acceptanceof security tokens as a means of capital raising.

Additionally, the number of ICOs in the past year has raised significant challenges for potential inves-tors. Inundated with a huge number of ICO opportunities, many investors do not have the necessary

future ICO funding comes from large institutional investors or retail investors, we believe that thereis an urgent need for appropriate and coordinated global regulation of ICOs, a roll-out of reputable,enterprise-grade technology to support liquidity in security tokens, and general improvements to thecryptocurrency and digital securities ecosystems.

In fact, the recent explosion of ICOs has drawn close scrutiny from global securities regulators, includ-ing the U.S. Securities and Exchange Commission (SEC). In response to ICOs of purported “utility”tokens conducted without regard for U.S. securities laws, the SEC issued its “Report of InvestigationPursuant to Section 21(a) of the Securities Exchange Act of 1934: The DAO” (the DAO Report) on July25, 2017.

Among the key issues addressed in the DAO Report was whether tokens issued in ICOs constituted“securities” subject to U.S. federal and state securities laws. The SEC stated that “whether a particular

in the transaction—depends on the facts and circumstances” of the particular transaction. In the DAOReport, the SEC applied the “Howey Test” articulated by the U.S. Supreme Court in SEC v. W.J. HoweyCo., 328 U.S. 293 (1946). The Howey Test analysis turns on the presence of a few specific features: aninvestment of money in a common enterprise and with the expectation of profits that are expected

Test and determined that the token under consideration was, in fact, a security, subject to the U.S.

security must be registered under the Securities Act of 1933, as amended (the Securities Act), or be

The SEC’s recent actions and statements suggest that many tokens will be considered securities bythe SEC. We believe that the SEC’s actions with respect to ICOs pave the way for regulatory bodies andgovernments globally to apply securities laws and regulations to the majority of ICOs. This would re-sult in a regulatory framework for all aspects of an ICO and its issuer, including issuance requirements,disclosure requirements, secondary trading market requirements and the application of general com-pliance standards to security tokens.

tZERO understands that regulation in the crypto-world is inevitable and we are working to developa scalable and stable securities token trading platform that, when operational, will be fully compliantwith applicable legal and regulatory requirements.

The launch of tZERO’s own token is intended to capitalize tZERO to, among other things, develop acrypto-solution for security token liquidity that complies with applicable legal and regulatory require- [3]ments and to build the necessary infrastructure to support global adoption of this platform. Webelieve that the tZERO trading platform, once operational, has the potential to democratize, expandand strengthen capital markets.

uses set forth in the Memorandum in its sole discretion.

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tZERO token -ken (TZRO).

The tZERO token is the first preferred stock security token of which we are aware, and the tZERO to- [4]ken is being issued in accordance with applicable U.S. federal and state securities laws.

The terms of the tZERO token are described in the Memorandum. See “Annex B: Terms and Conditionsof the tZERO Preferred Equity Tokens” in the Memorandum for details regarding the terms of thetZERO tokens, including dividends under the tokens, which, subject to the limitations described in theMemorandum, will be based on tZERO’s consolidated adjusted gross revenue (i.e., revenue, net lessCost of Sales).

This whitepaper will delve into tZERO’s products, business models, technology platforms, team, andthe company’s vision, including with respect to the development of the tZERO security token tradingplatform.

We believe that the discussion of tZERO’s existing businesses will help investors understand thesource of existing revenues and potential sources of future revenue generation. We will also explainhow we plan on utilizing a portion of the funds raised

to develop markets that are more transparent, ef-

ficient and liquid through use of technology, with afocus on blockchain technology.

from a traditional utility token ICO, which is typically

characterized by 3 W’s – a website, whitepaper, andwallet address. Many of these traditional utility to-ken ICOs have been launched by international foun-dations, which seek to rely on the utility of their to-ken to avoid being deemed a security under relevantsecurities laws. In some cases, the participants inthese utility token ICOs are considered “donors” andmay not receive any rights along with their token.

4 -tration requirements of the Securities Act—particularly, Rule 506(c) of RegulationD and Regulation S. See “Notice to Purchasers” in the Memorandum.

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In addition, because of the onerous requirements of the U.S. securities laws, some issuers of suchutility token ICOs exclude U.S. investors entirely. Also, larger institutional investors are not interestedin unregulated, highly speculative investments. In many of these utility token ICOs, the issuers of a to-ken assert that securities laws are inapplicable and do not employ any investor protections, includingdetailed disclosure. In this context, the proposed product is often outlined in a highly theoretical whitepaper without an existing core technology platform or user base. Against this backdrop, the currentICO market has experienced significant challenges recently, including regulatory hurdles and instancesof fraud and abuse carried out to take advantage of strong investor appetite for ICOs. However, at thesame time, a significant number of legitimate blockchain startups show tremendous potential and arecommitted to advancing the digital revolution while rewarding early supporters.

The technology utilized to conduct ICOs is obviously valuable, and the amount of capital raised in ICOsdemonstrates that the demand for investing in blockchain technology is immense. We aim to satisfy -chain innovators to replicate and raise funds.

includes the future development of the tZERO security token and a security token trading system,the development of certain functional utility benefits that, while not a part of the terms of the tZERO

changes, and general corporate purposes, including strategic transactions by tZERO and reducing tZE-RO’s debt burden. For more information on the contemplated use of proceeds of the tZERO securitytoken offering, see the section titled “Use of Proceeds” in the Memorandum.

As tZERO seeks to develop a security token trading system, we hope to provide entrepreneurs a regu-lated platform and structure for security tokens.

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addressing many shortcomings and regulatory concerns surrounding such ICOs. The tZERO token is -munity), while maintaining the flexibility to provide discretionary practical benefits (utility benefits) toholders of tZERO tokens (uncommon for traditional securities). Such practical benefits for token hold-ers create an opportunity for companies to reduce customer acquisition costs and increase customerretention. While the ultimate goal for most investors is a return on their investment, we believe thatmany firms in the future will want to explore providing practical benefits to token holders. Issuing se-curity tokens, with a utility function (whether inherent to the terms of the token or provided on a dis-

investors participate in accordance with SEC regulations designed for investor protection. In the caseof the tZERO security token, investors are screened as “accredited investors” and all investors aresubject to rigorous anti-money laundering (AML) and know-your-customer (KYC) verifications.

If tZERO is successful in developing a security token trading system that complies with all applicablesecurities laws and regulations, this will be ground-breaking in providing security token holders a li-quidity platform to trade securities tokens in a regulated environment, subject to securities rules andregulations.

and the plan. This whitepaper will outline our existing business operations, our plethora of proprietarytechnology, as well as key problems in the market that we are perfectly positioned to address and havealready begun solving with our existing infrastructure and experienced team of innovators, entrepre-neurs and technologists.

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The tZERO Team

The tZERO team is comprised of a dynamic mix of accomplished entrepreneurs, brokerage experts,and expert technologists. Below is a series of descriptions of key high-level team members, as wellas some information pertaining to tZERO’s technology and brokerage teams.

Patrick M. Byrne CEO

In 1999, Patrick M. Byrne launched Overstock.com, and has grown it into

the grand online retailer that it is today. Patrick was one of the ﬁrst public ﬁgures to vocally espouse the massive potential of cryptocurrencies and blockchain technology. Patrick’s ﬁrst leap into the crypto-world occurred in 2014, when Overstock became the ﬁrst major online retailer to accept bitcoin as payment for goods. In 2015, Byrne allocated some Overstock. com resources to acquire ﬁntech entities, and used tZERO’s trading plat- form to purchase a digital bond that cleared and settled on a blockchain. In 2016 Overstock made history by becoming the ﬁrst company ever to issue shared of a public company on a blockchain, rather than through the facili- ties of NSCC and DTCC. Not only has Byrne established himself as a block- chain visionary, he has taken great strides towards implementing his revo- lutionary vision.

Joe Cammarata PRESIDENT

Joe began his career at Datek, where he spearheaded the creation of an internal order crossing engine that evolved into the Island ECN. He then orchestrated and oversaw the incredible growth of Datek Online - which was sold to Ameritrade for $1.4 billion. Joe later co-founded Sonic Trading and piloted the company as CEO to a successful acquisition in 2004 by the Bank of New York, where he served as Managing Director. In 2011, Joe pur- chased a defunct brokerage ﬁrm, which was resurrected as SpeedRoute. Under Cammarata’s tutelage, the ﬁrm increased its business tenfold. He is currently the CEO of SpeedRoute, and President of tZERO. Joe’s track record of innovating trading markets through the implementation of tech- nology is second to none. His expertise will be vital to the growth of tZERO.

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Ralph Daiuto COO & General Counsel

Ralph Daiuto is an accomplished business leader and attorney with over two decades of experience in the securities industry. Daiuto has governed several broker-dealers and innovative technology companies where he managed their daily operation, including legal, compliance, and regulatory undertakings. Ralph is currently the COO and General Coun- sel of tZERO. He is admitted to practice law in the states of NY and NJ, as well as the U.S. District Courts in the Southern and Eastern Districts of NY and the District of NJ. Ralph’s experience in navigating highly reg- ulated industries while applying innovative technology will be key to the success of tZERO.

John Gilchrist CIO

Industry veteran John Gilchrist (“Gilly”) joined Herzog Heine and Geduld in 1987, where he was responsible for monitoring and growing trad-

were rapidly transforming through the use of technology, Gilly was in- strumental in upgrading Herzog’s technology infrastructure while they ascended to the position of the largest NASDAQ market maker. After Herzog was acquired by Merrill Lynch, Gilly was responsible for Merrill’s NASDAQ market making and DMA offerings. He has been employed by SpeedRoute since its inception in 2011. Gilly has been crucial in over- seeing the various tZERO projects, ensuring that resources are properly managed, systems are designed for scalability, and technology rollouts are deployed without error.

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The Technology Team

The tZERO technology team is comprised of experts in blockchain development, network en-gineering, low-latency systems development, systems integration, and large-scale data pro-cessing. tZERO’s blockchain development team is well-positioned to thrive and innovate, as

technology upgrades. The tZERO technology team is perfectly positioned to create meaningful

The Brokerage Team

The brokerage team is composed of industry veterans who are experts in monitoring and reduc-

Since inception, tZERO has worked to ensure that our pursuits fall within regulatory guidelines.In addition to operations and compliance personnel, the brokerage team has a strong business

the client base and product offerings. In total, there are currently 15 registered representativesholding the following licenses: 4, 7, 24, 27 , 57, 62, 63, 66, and 99. The tZERO brokerage teamwill be indispensable as tZERO navigates the regulatory framework of U.S. capital markets.

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Our StoryAt a point when the terms “Bitcoin” or “blockchain” had barely entered the national lexicon, Patrick By-rne had already decided to venture into the crypto-world. Overstock’s first step into the crypto-world

company a massive head start with the modern and complex technology.

While Dr. Byrne knew that Bitcoin was a remarkable product, he was captivated by the underlying tech-nology of cryptocurrencies, the blockchain. He saw major room for improvement in the financial sys-tem by integrating blockchain technology into outdated financial technology. Major breakthroughs intechnology often lead to the elimination of burdensome third-party intermediaries from transactions.Blockchain technology has the potential to perform this on a massive scale, allowing buyers and sellersto interact with one another directly, without a third party monitoring the transactions. Byrne knewthat in order to pursue his ambitious vision of bringing blockchain to Wall Street, he should align him-self with a technology-based firm that had a strong presence in financial markets. A fortuitous meet-ing with Joe Cammarata got the ball rolling for Overstock to acquire SpeedRoute and Pro Securities.

SpeedRoute is a FINRA-regulated agency brokerage firm that specializes in routing equity orders toU.S. market centers. Joe Cammarata founded the firm in 2011 by acquiring a failed brokerage firm andresurrecting it. SpeedRoute’s main functions include: providing connectivity to the dozens of US eq-uity marketplaces and supplying customers with technology to reduce costs and improve executionquality. Between 2011 and 2015, SpeedRoute’s book of business grew tenfold as it focused on improv-ing its technology and fostering deep, strategic relationships with its current customer base of 125+brokers. SpeedRoute maintains integrated systems with all major U.S. order management systems.SpeedRoute maintains the integrations necessary to route equity orders to every U.S. equity exchangeand dark pool. SpeedRoute’s vast network of front ends, and execution venues provides the perfectframework for integrating blockchain technology into financial markets. This is the primary reasonthat Overstock acquired SpeedRoute.

Pro Securities is a FINRA regulated broker dealer that was acquired by Joe Cammarata in 2010. Pro Se-curities operates an SEC-regulated Alternative Trading System. Pro Securities’ ATS remained non-op-erational for several years while SpeedRoute was being built out, in hopes that the two firms wouldeventually develop a synergistic relationship. Pro Securities’ ATS license and matching engine technol-ogy piqued the interest of Overstock, leading them to make an initial investment in Pro Securities in2014.

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In 2015, Overstock, Pro Securities, and SpeedRoute successfully collaborated on digital stock loantechnology platform. After seeing the potential of these teams working together and what they couldaccomplish, Overstock, through tZERO, acquired Pro Securities and SpeedRoute through a series oftransactions beginning in the third quarter of 2015 and ending in the first quarter of 2016.[5]

Today, Overstock indirectly owns 81.0% of tZERO and the remaining 19.0% of t0.com, Inc. is held by 27other individual or entity shareholders, many of whom are employees or former employees of tZERO.

The tZERO team is comprised of highly successful entrepreneurs, experienced blockchain developers,a seasoned brokerage ensemble, and a bevy of fintech technologists, all ready to revolutionize capitalmarkets through blockchain technology.

Since its formation by Overstock, the tZERO team has been fervently building new technology, whilenurturing strategic partnerships, and proving itself to be an industry leader in the blockchain space.We believe that the focus placed on technology development during this period provides us with atremendous competitive advantage moving forward.

Some of the products and ventures (both blockchain-related and otherwise) that have been estab-lished during this period include developing a Digital Locate Receipt suite of software, acquiring amajority interest and launching an overnight equity trading platform (Blue Ocean) , entering a letter -

utilizing blockchain technology—Overstock’s Blockchain Voting Series A Preferred Stock, which tradesoutside of the facilities of NSCC and DTCC and utilizes blockchain technology.

Later in this whitepaper, we will be going into these projects in more detail. tZERO’s story is a story ofinnovation, market disruption, and collaboration. We look forward to continuing that story.

5 See Note 1 to tZERO’s unaudited consolidated financial statements included in the Memorandum for additional detail on theseries of transactions pursuant to which Overstock acquired its interest in tZERO and its subsidiaries.

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Our ProductsDigital Locate Receipt (DLR) SoftwaretZERO has engineered a suite of licensable software that we believe will revolutionize the stock loanbusiness. Currently, a great deal of stock loan transactions are performed using non-automatedsystems. We believe that this leads to massive pricing and allocation inefficiencies, combined withpotential for the lending of stock that is not actually owned by, or accessible to, the lender. In thiscontext, it is possible that some entities will nefariously over-lend stock, thus allowing naked shortselling to occur. The lack of a digital record emboldens them to do so.

The DLR suite of software allows broker-dealer licensees with stock inventory (inventory providers)to both load and manage their inventory via a front end system; they can provide locates to theirclients who wish to short-sell stock or loan the stock to their clients who wish to borrow the stock.The broker-dealer licensees who are looking to borrow stock (borrower) may also transact withinventory providers, where the borrower will pay the inventory provider to lend the borrower stock.For inventory providers with significant inventory or who contract with a significant inventoryprovider, their customers would have the ability to borrow by using a convenient, transparent,electronic market-based system. As borrowers purchase DLRs, the software decrements the remain-ing inventory, and an immutable trail of ownership can be maintained by writing such transactionsto a proprietary or other blockchain.

The above image is a display of tZERO’s front end implementation of tZERO’s DLR software suite. The streamlineddigital software provides licensees’ customers with an intuitive, user-friendly experience allowing the trader orinventory provider to satisfy compliance requirements around short-selling in an automated,

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SpeedRoute Execution Services

brokerage clients, expertise in routing orders to market centers, and regulatory prowess pro-vide an incredible foundation that can be drawn upon as we seek to build out cryptocurrencyand crypto-token technologies in a regulated setting.

Blue OceanBlue Ocean is an overnight trading platform for U.S. equities. U.S. equities markets are non-op- -ciency by operating its ATS between these hours. This platform allows customers to manage -ed than ever, it no longer makes sense to fragment equities markets’ trading hours. Blue Oceanseeks to address this problem.

Discounted Retail Trading through Siebert Financial

In December 2017, tZERO signed a letter of intent with Siebert Financial Corp. (“Siebert”) tooffer discounted online trading of U.S. equities to customers through the Muriel Siebert & Co.and Overstock relationship. Customers subscribing to the discount brokerage suite of prod-ucts would be offered services, including smart order routing and execution services bySpeedroute, and Clearing Services through StockCross Financial Services, Inc. (“StockCross”),

See “Recent Developments” in the Memorandum for important information about the SiebertLetter of Intent and certain equity investments that tZERO is pursuing.

Robo Advising through tZERO Advisors

tZERO expects to launch robo-advisory services in 2018, through a partnership with an an-

tZERO will also explore the ability to include cryptocurrencies in portfolio allocation. In today’s

cryptocurrencies. We aim to offer investors an option to address

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tZERO’s Trading Platform and Planned Token Trading System

In 2016, Overstock conducted an SEC-registered rights o ering, which included an opportunity to

purchase Overstock’s Blockchain Voting Series A Preferred Stock (OSTKP). OSTKP does not tradethrough the facilities of NSCC or DTCC, but rather trades utilizing a suite of software technologiesreferred to as the tZERO Issuance and Trading Platform (the “tZERO Platform”). OSTKP trades exclu-sively on the PRO Securities ATS, which utilizes the tZERO Platform and blockchain technology.

While the o ering of OSTKP served as a milestone for the issuance and trading of digital securities ina manner that utilized blockchain technology, the application of the tZERO Platform totrading of OSTKP is subject to limitations.[6]

The tZERO Platform was a massive undertaking and historic achievement that sets the stage fortZERO to develop a securities token platform.

tZERO intends to leverage its experience and expertise in developing and maintaining the tZEROPlatform to develop a trading platform that is capable of trading security tokens (i.e., tokens or coinsthat are determined to be securities for purposes of U.S. securities laws). tZERO currently does notanticipate that the tZERO Platform will be deployed in connection with the contemplated tokentrading system in the same manner as it is currently deployed by the PRO Securities ATS.

Although tZERO has not yet developed the planned tZERO token trading system, the company ispreparing the appropriate technological resources to achieve this goal. Nevertheless, a variety oftechnological, legal, and regulatory factors could impede the development, or ultimate functionalityof the token trading system.[7]

As a result of its activities to date, tZERO has been at the forefront of the e ort to bring greatere ciency and transparency to capital markets through the integration of blockchain technology.

Below are images of some of the interfaces used and developed for the OSTKP rights o ering.

6 For example, these limitations include: (i) only U.S. investors are permitted to transact on the PRO Securities ATS and (ii) all holders of OSTKP are required to open an account with, and access the PRO Securities ATS through, a single U.S. broker-dealer selected by tZERO

7 See “Risk Factors” in the Memorandum for important information about the risks related to tZERO’s development of the contemplated security token trading system.

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The above image depicts the tZERO Issuance Interface developed for OSTKP. Subject to thelegal and regulatory limitations of the tZERO Platform, this tool enables permissioned users toissue any supported asset class. The UI technology can be utilized to set applicable asset char-acteristics such as class, ticker symbol, issue quantity, issuance price, and destination address.tZERO has built an API to allow seamless integration to third party issuance platforms.

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The above image is a screenshot of our proprietary web-based trading front end, Lite Trader.The UI displays real-time market data for OSTKP trading on the tZERO ATS as well as tradition-al securities. From this interface, customers can place orders, as well as view their open orders,order history, cash balance, and positions. The Lite Trader front end integrates into existingmarket infrastructure via FIX and RESTful APIs.

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The above image is of the tZERO Ledger Explorer. This tool provides a public view into thetrading activity of OSTKP trading in tZERO’s ATS. A user can submit queries through the Led-ger Explorer that will provide transaction data, such as timestamps, transaction type, publicaddress, and quantity. The Ledger Explorer presents a user-friendly interface to explore trans-actions stored on a blockchain.

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End to End Trading Ecosystem

tZERO’s broad end-to-end capital markets ecosystem is truly remarkable, spanning both block-chain-related applications as well as traditional trading functions. This ecosystem is comprised of aweb-based order entry system, a desktop order entry system, an order management system/orderrouting system, a regulated ATS with matching engine technology, and a clearing/settlement systemwith optional ledger agnostic blockchain functionality. These components are fully integrated withone another and fully operational in production. With respect to digital securities trading, OSTKP iscurrently trading utilizing tZERO’s first generation trading platform.

These tools also have fully operational test environments for client usage, as well as a suite of riskmanagement tools, including 15c3-5 risk checks. Our existing trading system can be reconfigured totrade existing or new asset classes. Below are some of the major components of our existing tradingsystem:

Front End Trading Systems

tZERO’s web-based and desktop front end systems provide an order entry mechanism for traders.These systems were originally built to trade U.S. equities, and provide users with traditional and spe-cialized order entry fields and order types. The web based platform is designed for less sophisticated,retail users, while the desktop system is reminiscent of a professional trader’s front-end trading sys-tem.

Risk Management Technology

SpeedRoute’s risk management tools are 15c-3-5 compliant. Stable risk management technology isvital to launching and operating new trading platforms. There are over 50 unique and enforceable riskmanagement rules built into the system including:

• Notional trading amounts for clients and exchanges. This includes notional amounts of trades that have been executed, or could be executed.• Rejection messages from execution venues.• Unexpected order latency.

Order Management System (OMS)

tZERO’s Order Management System is the backbone of SpeedRoute’s core business. The system cur-rently receives equity orders from over 25 third party front end systems, and intelligently routes thoseorders to various market centers. The capacity of the OMS is truly amazing; it has consistently pro-cessed tens of millions of orders on a daily basis with near 100% uptime for the last 7 years. The OMSis a perfect starting point for building a crypto-routing tool.

Smart Order Router (SOR)

tZERO’s SOR was built to aid brokerage customers in navigating the complex, fragmented U.S. equity market system. The router is fully customizable based on client preferences and order instructions. Below are some key features of the SOR:

• Dynamic order routing preference based on current market prices, proprietary heat map technolo- gy, and historical trends so that orders are sent to the best market at the time. • Numerous safeguards to minimize client impact when market center(s) are having issues process- ing orders. This includes an automated process of diverting orders from venues experiencing out- ages, the ability to implement immediate manual configuration changes, and programmatically leveraging redundant connectivity options. • centers, re-route orders when new passive orders appear on an exchange, rest orders at markets for specific periods of time, implement synthetic stop loss orders, conditional order routing, and much more.

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out-of-the-box solution to improve a client’s execution performance. In the U.S. equities space, SORsbecame a necessity as more and more exchanges, dark pools, and other execution venues emerged.There is already a need for stable, trusted, and high performing SORs for crytpocurrency markets, andthat need will grow as more exchanges surface. tZERO is well-situated to pursue this.

Matching Engine

sellers. tZERO has built a highly configurable matching engine that can provide exchange technologywith the optional functionality to anchor trades to a blockchain.

The pieces of technology that make up tZERO’s capital markets ecosystem are of utmost importanceto tZERO’s business lines. In addition, tZERO licenses out these technologies to various companies

distribute and allocate shares of privately held companies to their clients. By introducing market basedtrading to emerging asset classes, tZERO is seeking to transform capital markets by making themmore transparent, liquid, and accessible.

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SpeedRoute Architecture

SpeedRoute’s core technology system is designed to meet the low latency, high throughput demandsthat are the result of Regulation NMS and High Frequency Trading. The SpeedRoute CORE and clientapplications are written in C++ and compiled to run on Windows X64 2008-2012 Server. Applicationscan run in either 32 or 64-bit Windows environments. SpeedRoute components are modular to facili-tate the ability to modify components to fit various workflows and implementation.

past 10 years. Our infrastructure is modular and customizable. It has already beenrepurposed for securities lending, private company shares, and can beleveraged for many new asset classes.

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Data CenterAll technology is domiciled in Equinix NY4, which is utilized by many of the U.S. equity exchanges,banks, and brokerage firms. Within NY4, we rent a private, secure cage that houses our 5 dedicatedracks with the following specifications:

• Certifications- SSAE16 SOC-1 Type II ; SOC-2 Type II ; ISO 27001

• Power Redundancy- N+1 • Cooling Redundancy- N+2

Proprietary Network

ResilencyThe Production network at Equinix/NY4 is based on a 6-member switch stack comprised of Cisco Cat-alyst 3750G switching platforms acting as a single virtual switch. Failure of any single device results in

Distribution of systems comprising a single OMS cluster across multiple switching platforms reducesimpact of loss of a single stack member.

RedundancyAll of our environments at Equinix/NY4 are protected by nodes of stateful packet inspection firewallsprovisioned as High-Availability clusters. Hardware failure of the Primary or Active firewall appliance -tion duties seamlessly with no impact to established sessions. In addition, rule-bases are based onvery restrictive access control providing a highly secure overall trading environment.

StabilityAll hardware components comprising our networking environment have been selected as “best ofbreed” products. All switching platforms are based on Cisco Catalyst platforms while security nodesare either Cisco ASA 5500 security bundles or SonicWALL NSA series appliances. Devices have beenprovisioned leveraging such options as EtherChannel, Stateful Failover, Stateful High Availability, Vir-tual MAC and STP Portfast to maximize resiliency and uptime.

High Speed Local Connectivity

high speed local connectivity options to both execution

venues and clients.

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Use of ProceedsBelow is a layout of tZERO’s expectations for use of proceeds from our tZERO security token capital [8]raise :

• The future development of the tZERO tokens and the contemplated security token trading sys- tem, which includes augmenting tZERO technology, infrastructure and personnel.• Strategic transactions, including key equity investments described in the Memorandum.• Development of discretionary practical benefits (utility benefits) that may be made available to holders of tZERO token holders.• Other general corporate purposes, which include the repayment of amounts payable to Overstock, and may also include capital expenditures, acquisitions, other debt repayments, cybersecurity upgrades, global expansion of products and services and short-term investments, among other things.• Lobbying law makers and regulatory authorities for the purpose of bringing about changes to laws and regulations related to blockchain technologies, particularly in regards to securities tokens.

uses set forth in the Memorandum in its sole discretion.

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VisiontZERO’s vision is to strengthen capital markets through the use of technology, with a primary focuson blockchain technology.

The Capital Markets connect entrepreneurial businesses seeking to raise capital with investors seekinginvestments that will provide a return on their investment. Modern capital markets form a systemthat is integral to society. As a result, strengthening capital markets contributes to a variety of societalgoods, including wealth formation, job creation, and the freedom to pursue entrepreneurial dreams.

tZERO seeks to bring enterprise-grade technology to burgeoning crypto capital markets and aims tointegrate blockchain technology into traditional capital markets functions, where useful or needed. Inaddition to operating and growing our current businesses, with 15 new broker-dealer clients added thispast quarter, we have been forming strategic relationships with subject matter experts across multiple

investors, issuers, and market participants.

As the fintech and blockchain industries inevitably intertwine, the businesses that are highly adapt-able, forward-thinking, and experienced will emerge as dominant forces. As demonstrated throughoutthis paper, tZERO meets all of these criteria and more. Our battle tested technology stack also sets usapart from other parties in our space, many of whom only have an outline of goals as their sole pieceof Intellectual Property. Our huge investments in developing a regulatory strategy has laid the foun-dation for our vision to become reality. tZERO plans to change the world. We hope that you join us.

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Additional DocumentsWe have included supplemental documents to provide much more detailed information regarding tZE-RO’s products, technology, and infrastructure. Below is a list of those supplemental documents withsome descriptions. These documents will be available on the tZERO website.

SpeedRoute CORE System Software Architecture Document

This document provides a detailed description of the technology used by SpeedRoute to receive, han-dle, and process customer orders. We have included the version from August of 2015 as we are notdisclosing various recent enhancements.

Blue Ocean Information Guide

DLR FIX Spec

This is the document that provides certification instructions to broker-dealer licensees and/or theirthird-party front-end providers so that they may implement the DLR software. This is one example ofhow we’ve leveraged our existing infrastructure for a unique and disruptive asset class.